The following is provided for informational purposes, and not meant to be legal advice.
To encourage foreign multinationals to establish regional headquarters (“RHQ”) in Shanghai, the Shanghai Municipal Government in China announced on July 20, 2002 the Shanghai Regional Headquarters Regulations.
A RHQ means an office in Shanghai of a foreign multinational corporation that, through investment, exercises management and service functions for at least three enterprises in a region consisting of more than one country, with at least one of the enterprises outside of mainland China. A RHQ cannot manage enterprises in mainland China alone. Enterprises in Hong Kong, Macao, or Taiwan may qualify as being outside of mainland China.
RHQs may be in two corporate forms: (1) holding companies, (2) management companies. Both types of corporate forms may be wholly owned by foreign investors. RHQs must have independent legal person status. Holding companies must be established under central government approval and be recognized by the Shanghai authorities. Management companies are authorized by the Shanghai RHQ Regulations, but not by the central government.
A RHQ may engage in the following business activities:
- Investment and operational decisions
- Marketing services
- Capital operations and financial management
- Technical support and research and development
- Information services
- Personnel training and management
Incentives for establishing RHQs include:
- Subsidies for employee education and training
- Import and export rights
- Heightened access to officials
However, some incentives, such as export rights may be subject to central government approval, and cannot be enforced by the Shanghai RHQ Regulations. While the central government may approve incentives to holding companies, management companies may not be extended the incentives.
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